Question
Bond B is a 3% coupon bond with a yield of 8% that makes payments every month and has a maturity of 5 years. The
Bond B is a 3% coupon bond with a yield of 8% that makes payments every month and has a maturity of 5 years. The face value of the bond is $1000. The company who originally sold you bond B have come on hard times. They have informed you that they will not be able to make the next 12 coupon payments but forecast that they will be able to make all payments after this date. This will increase the yield to 15% reflecting a higher level of risk. What is the new value of the bond? What is the percentage change in price? Use excel for all calculations.
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